Exercise 12-5 As the recently appointed auditor for Pina Corporation, you have b

Question

Exercise 12-5

As the recently appointed auditor for Pina Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2017, are prepared. The controller for Pina Corporation mentions that only one account is kept for intangible assets. The account is shown below.

Intangible Assets

Prepare the entries necessary to correct this account. Assume that the patent has a useful life of 10 years

Debit

Credit

Balance

Intangible Assets

Prepare the entries necessary to correct this account. Assume that the patent has a useful life of 10 years

Debit

Credit

Balance

Jan. 4 Research and development costs 941,000 941,000 Jan. 5 Legal costs to obtain patent 74,640 1,015,640 Jan. 31 Payment of 7 months’ rent on property    leased by Bryan 91,700 1,107,340 Feb. 11 Premium on common stock 241,000 866,340 March 31 Unamortized bond discount on bonds    due March 31, 2037 110,400 976,740 April 30 Promotional expenses related to    start-up of business 215,500 1,192,240 June 30 Operating losses for first 6 months 256,500 1,448,740

Explanation / Answer

Please note: Only correcting entries recorded. Adjusting entries are not recorded.

Date Account Debit Credit Jun.30, 2017 Research and development expenses 941000 Patents 74640 Prepaid rent 91700 Discount on bonds payable 110400 Retained earnings 256500 Start-up expenses 215500 Intangible Assets 1689740 (To record correction of intangible assets) Jun.30, 2017 Intangible Assets 241000 Paid-in capital in excess of par-common stock 241000 (To record correction of intangible assets)

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